The cement sector in Pakistan is experiencing a remarkable profit boom, but it is also bracing for a potentially softer quarter ahead. According to the latest sector update by Topline Securities, the 15 publicly listed cement companies reported an 89% year-on-year increase in after-tax earnings for the January-March 2025 quarter (3QFY25), reaching Rs33.7 billion. However, the profits dipped by 3% compared to the previous quarter, highlighting the complex dynamics in the market.
The industry’s performance reflects two opposing trends: improved fuel economics and rising export volumes on one side, and weaker local demand and declining prices on the other. While exports surged by 19% year-on-year, the local market saw a 7% drop in sales volume from the previous quarter, as the usual post-winter construction lull arrived earlier than expected. However, the sales volume was still 4% higher than the same period last year.
Total revenues for the cement sector fell by 15% compared to the previous quarter, amounting to Rs168.2 billion. Despite this, they saw a modest 6% increase year-on-year. The drop in revenues can be attributed to a reduction in average bag prices in the northern zone, which fell to Rs1,360 from Rs1,447 in the previous quarter. This was due to intensified competition among mills facing shrinking demand from retail customers, as public-sector projects struggled with funding constraints.
Despite the revenue slowdown, the cement industry’s gross margins expanded by 2.9 percentage points year-on-year, reaching 29.7%. This improvement was largely driven by cheaper coal prices and a more diversified fuel mix, with northern plants relying on Afghan and local coal, while southern plants used cargoes from South Africa’s Richards Bay.
As the Eid holiday traditionally slows down construction activity, the cement industry is preparing for a challenging quarter. After several tough years, however, the industry has finally found some breathing room, thanks to rising exports and favorable fuel costs, providing a glimmer of hope for the future.